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Business
Semester 201003
Accounting
DBS1008
201
2010/11 0
Submission Date: Thursday 9th Business
November 2010, Submit to the PDIC Accounting
Coursework
student office before 12 noon
–
Assignment
– 20010/11
Semester 201003
Level 1
th
Submission Date: Thursday 9 November 2010, Submit to the PDIC
student office before 12 noon
£ £
Revenue 2,300,000
Less Cost of Sales (1,137,500)
Gross Profit 1,162,500
Less Expenses
Wages 420,000
Rent 300,000
General expenses 310,000
Loan interest 5,000
Bad debts 12,000
Depreciation 64,000
(1,111,000)
Profit for the year 51,500
Retained profit brought forward 75,500
Retained profit carried forward £ 127,000
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Balance Sheet at 31st December 2008
£ £
Non-current Assets
Machinery at cost 320,000
Less Depreciation 85,000
235,000
Current Assets
Inventories 150,000
Trade receivables 215,000
Prepaid expenses (rent) 50,000
Cash at bank 87,500
502,500
Total Assets £ 737,500
Equity ( capital ) 350,000
Current Liabilities
Trade payables 160,500
£ 737,500
The following transactions took place during the following year ended 31st December 2009:
£
1 Sales of goods for the year, all on credit, totalled 2,800,000
(The goods had cost £1,500,000.)
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8 Cash received from trade receivables totalled 2,450,000
(b) Calculate the following four ratios for 2008 based on the profit and loss account
and balance sheet provided in the question and for 2009 based on the accounts you
have prepared in (a):
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Total Assets 100,150
Capital
Opening capital 50,000
Retained Profit 26,900
76,900
Current liabilities
Trade payables 22,000
Accrued expenses 1,250
**
23,250
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12. Payments to trade creditors totalled £71,000.
13. Van running expenses paid totalled £16,200.
The business uses the straight-line method for depreciating non-current assets.
Required:
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MAR200 Summary of Key Financial Ratios
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Type and name Format Formula
Profitability ratios
Return on Profit for the year less preference dividend if any
x 100
ordinary Ordinary share capital + reserves
shareholders’ %
funds (ROSF)
Return on capital Operating profit x 100
%
Net profit margin Operating profit
x 100
Sales revenue
%
Gross profit Gross profit
x 100
margin Sales revenue
%
Efficiency (activity) ratios
Average inventory Average inventorie s held
x 365
turnover period da Cost of sales
ys
Average Trade receivable s
x 365
settlement period da Credit sales
for receivables ys
Average Trade payables
x 365
settlement period da Credit purchases
for payables ys
Sales revenue to n:n Sales revenue
capital employed Share capital + reserves + non - current liabilitie s
Sales revenue per Sales revenue
employee £ Number of employees
Liquidity ratios
Current ratio n:n Current assets
Current liabilitie s
Acid test ratio n:n Current assets (excluding inventorie s)
Current liabilitie s
Cash generated Cash generated from operations
from operations N:n Current liabilitie s
to maturing
obligations
Gearing ratios
Gearing Long term (non - current) liabilitie s
x 100
% Share capital + reserves + long term (non - current) liabilitie s
Interest cover Profit bef ore intere st & tax
time Interest p ayable
s
Investment ratios
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Dividend payout Dividends announced during the year
x 100
% Earnings f or the yea r availabl e for divi dend
Dividend cover tim Earnings for the year available for dividend
es Dividends announced during the year
Earnings per Earnings available to ordinary shareholde rs
share penc Number of ordinary shares in issue
e
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